Sunday, August 28, 2016

Vice President Biden on Friday, August 26th announced that Amtrak will receive a $2.45 billion federal loan. Amtrak will use the loan to purchase 28 new train sets for the
Acela service on the Northeast Corridor, which will offer 40 percent
more seats than currently offered on Acela trains making stops in
Washington, D.C., New York, and Boston, according to
an announcement from Biden’s office. “This loan is a key step to
providing investments needed to help keep high-speed trains moving
throughout the region, and to help all commuters in the Northeast
Corridor,” Biden said in a statement. “We need these kinds of
investments to keep this region – and our whole country – moving, and to
create new jobs.”

According to a CNN report, the Vice President frequently traveled on
Amtrak when he was a Delaware Senator. When announcing the loan on Friday at
the Joseph R. Biden Jr. Train Station in Wilmington, Biden said, "I
have traveled over 2,100,000 miles on Amtrak. I have made over 8,000 —
roughly 8,400 round trips. I believe it's about 257 miles a day. And
these men and women have become my family." The White House says the U.S.
government will cut a mammoth $2.45 billion check to Amtrak in what will
be the largest single loan in the Transportation Department's history. Amtrak has
been working to fund new trains and improve infrastructure throughout the country.

It must be noted, however, that intercity passenger rail services provided by the National
Railroad Passenger Corporation also known as Amtrak are already heavily
subsidized by the federal government and loses money annually. In 2015,
it reported a $306.5 million loss. It claims it will be able to pay for the improvements through growth in the
Northeast Corridor, which has long been a source of revenue for the
service. Ironically the government cash infusion comes the same day the Boston Globe reported that Amtrak
threatened to cut rail service from Boston to New York and Washington,
D.C. because of an ongoing dispute with the state's transportation
authority over who should pay for maintenance of the Northeast Corridor. With part of the money from the loan, Amtrak plans to undertake necessary track upgrades
between the New Carrolton and Baltimore stations as well as perform station
and platform improvements at four of the busiest stations in the
Northeast Corridor.

The truth is this story received little notice or scrutiny by the media and was
simply hailed as progress in the effort to improve the country's
infrastructure while creating good paying jobs. Since 1970 federal subsidies to Amtrak have totaled about $45 billion, calling this a loan may be a misnomer in that repayment is very doubtful. This is pure politics in a financially troubled country, the upgrades it will finance are aimed at improving the safety of the Northeast
Corridor mainline, and improve passenger experience and reliability. "There's no better way to say 'we're open for business' than
closing the largest loan in DOT history," Transportation Secretary
Anthony Foxx said in a statement. "America needs to go big on
infrastructure, and we're not just talking the talk. The Build America
Bureau has put the pieces in place to get big, transformative projects
done, and this is just the first big marker."

My problem with this loan is two-fold and amplified by the reluctance of our government to call a spade a spade. One issue pointed out by the Congressional Budget Office that saw cutting subsidies to passenger rail services was one of the things we should be doing to cut America's massive deficit. Federal funding is
subsidizing the operation of uneconomic services and routes (including
sleeper-class service and many long-distance routes) that are not used
extensively and provide little public benefit in terms of reducing
congestion or emissions of greenhouse gasses. The other issue is this so called loan will allow us to continue sidestepping the real issue confronting mass transportation and that is developing a system addressing the long-term goals of our changing nation.

Footnote; Below are two other posts from my archives concerning transportation in America. Thanks for reading, as always comments are welcome.

Thursday, August 25, 2016

The Clinton Foundation has been in the news a lot lately and not all the attention it is garnering has been good. A debate over the degree of conflict it presented for Hillary Clinton while she was Secretary of State and whether "favors were sold" make it a candidate as the poster child for crony capitalism. Even those arguing it is a vessel for good have a difficult time denying the Clinton's have done very well for themselves since leaving the White House. It seems the couple has gone from "dead broke" her words not mine, to amassing a fortune of nearly one hundred million dollars. While the Clinton Foundation might be proof you can make a fortune doing good or in the words of Lloyd Blankfein, CEO of Goldman Sachs, "doing God's work" it still raises eyebrows. This talk continues as Julian Assange last night said that Wikileaks is currently reviewing "thousands of pages of material" related to the Hillary campaign which he described as "significant."

Clinton Adds To Our Current State Of Confusion

This controversy brings me back to revisiting the question, What Is The Definition Of "IS"? During the years after leaving office, the image of Bill Clinton has been cleaned scrubbed and polished to the point he now is admired by many, however, it was not so many years ago that he was often referred to as "Slick Willie." Bill Clinton defended his infamous statement about Monica Lewinsky when he said, "I never had sex with that woman" by questioning whether oral sex is really sex and saying that it would depend on your definition of is. Below is a reprint of an article originally published in December of
2012 that delves into how the media ask questions, spin answers, and
manipulates conversations. It may also help shed a little light on why Americans have such a difficult time recognizing the truth.

What is the definition of "IS"?

When it comes to the way many media hosts conduct their interviews on the
Sunday morning talk shows the spin is incredible. The host often loads
the question then bends the answer. Bias moderators who lead talk shows
concerning important topics in America and Washington ask a question
then interject their opinions and ideas right over the top of the guest
answers. It is not uncommon to hear questions asked that can't be
answered or the answers have nothing to do with the question. I'm
reminded of the infamous response Bill Clinton gave to a question during
an interview, "it all depends on your definition of is."

As an example imagine a host allowing the following answer from a man
with a history of violence that was recently released from prison to the
following question. Have you stopped beating your wife? The convict
would say: "That depends on your definition of beating. I may rough her
up a little now and then, you know, backhand her across the mouth or
kick her, but no I don't beat her anymore." I suppose that when you use
the term "beat", you mean with an object like a pipe or stick, the
answer would be, yes this man has reformed.

When trying to interpret the information we garner from these shows we
should ask, does the host have an agenda? Until the American people and
the networks begin to demand more fair balanced information and fact
finding do not expect the quality of these shows to improve. A sad
commentary on the pace of modern life is that we have little time to
reflect and correct problems like these. When it comes to an event that
moves us emotionally we vow to remember it forever but within a few
hours, it becomes lost in the chaos of everyday life. Do not expect the
media to improve or change anytime soon.

Footnote; If you can handle a stronger rant on the clowns of media and the so called experts, please view the posts below,
http://brucewilds.blogspot.com/2013/05/scandal-upon-scandal-upon-scandal.html
http://brucewilds.blogspot.com/2012/03/you-dont-know-that.html

Tuesday, August 23, 2016

Recently several recent news stories have caused me to think about a post written years ago. Some of the stories were about such things as to how Hillary lies don't matter... White House lies don't matter... but why a drunk Olympic swimmer lies do. This has caused me to reflect on the new normal where a growing government-centered economy continues to crowd out the little guy and much of the world seems propelled forward by the propaganda machines of government and Ponzi schemes. We have the "Elites" also known as the rich and powerful, and we have the people, it is becoming increasingly hard to deny each play by a separate set of rules. This can cause us to feel powerless and at the mercy of those in positions of power.

The shenanigans of both our major political parties during the presidential primaries should have been enough to remind Americans that we live in a democracy in name only and that the country is really a republic. Today two big topics often in the news are the huge growth in inequality and a growing police state. Those who look
closely understand that it is not the 1% at the top stealing the icing
off the cake, but the much smaller .1% or .01% that are skewing the
numbers and overreaching. I contend this goes hand in hand with the
massive growth in crony capitalism and corruption.Much of this can be attributed to theability
of those in control "changing the rules" and positioning themselves to
benefit at every corner. In our busy and complex world, we have found it
impossible to watch all the moving parts. People are bad at keeping secrets and
insider knowledge is almost
always passed around. Doling out secrets and insider information confers
status, tactical
advantage, and sometimes even financial gain.

What might be called the "Deep State" definitely exists and it often
works in plain sight, however, not how it is depicted in the movies. In reality, human
beings are generally too incompetent, lazy and inept to carry out
schemes on a grand scale. Usually, the so-called deep state it is not
a complex conspiracy but the gut of a system laced with ever-growing
corruption and relaxed morals. Corruption and crony capitalism are cancers on society that grow if not
constantly treated. This means empires built on strength and a sound financial foundation can rapidly collapse
in our fast-changing world. Faith is the glue that holds much of our culture together. Remember debt is an often no more than a glorified
IOU and that bills can go unpaid and promises
left unfulfilled.

Last month I started something I hope to do on occasion, and that is re-post an
old article from this blog, A great number of posting can be found in the
archives of this site and many of the other sites existing on the
internet. With the invention of computers and easier ways to place our
thoughts before others the world has become a word generating monster
and much of this work has been saved. The criteria
for a re-post falls into one of the several categories such as looking back and remembering an event in our fast moving world. some re-post may focus on an event where all eyes were focused on an issue that seemed at the
time would have massive ramifications then became an obscure non-event. At other times it might be to cause reflection or stir insight. Consider these post a trip down memory lane. I hope you enjoy or garner something valuable from the article shown below that was originally published on February 7, 2012.

We Are All Slaves, an interesting thought.

Just over a year ago I stumbled upon a blog on WordPress.com written by
Gerry Spence who was born and educated in the small towns of Wyoming
where
he has practiced law for almost fifty-five years. Spence has spent his
lifetime representing and protecting victims of the legal system from
what he calls The New Slave Master: big corporations and big government.
Gerry Spence has tried and won many nationally known cases, including
the Karen
Silkwood case, the defense of Randy Weaver at Ruby Ridge, and the
defense of Geoffrey Fieger. He has never lost a criminal case and has
not lost a civil case from 1969 to 2008.

I feel it is interesting to see both the Tea party and the Wall Street
Movement ridiculed and manipulated by politicians and the media for
their own benefit and to marginalize their messages. Yes, we are slaves
in that we have so little freedom in today's modern world. The
combination of a constantly growing government and massive financial
corporate giants are slowly removing our options. Much of our culture
consists of people meeting their needs by filling the day with tweets and
other bland fillers. After all that has happened only this would
explain the lack of outrage!

Below is part of a post Spence published. I urge you to pay particular
attention to his line "With its endless propaganda the Moneyed Master
has caused its slaves
to believe they are free."
*********************************************

Pain, Protests and the People

Posted onOctober 5, 2011
The protests on Wall Street have been overdue but will end too
soon. Slaves cannot long maintain a war against the master. A
money-made U. S. Supreme Court has insured that the Moneyed Master can buy
elections, and only the Master has such money. The democratic idea of
government by the governed is a myth. One notes that the Republican
party is so sensitive to its master’s power that it dare not suggest
raising taxes on the Master –- not even an impoverished penny, much less
plug the illegal loopholes through which the Master sucks the last of
the lifeblood from the nation. All such slaves know that all power is
vested in the Moneyed Master.

The current protests are curious news. But the media, both the
printed and electronic, belong to the Moneyed Master. The people have
no voice and their protesting voices on Wall Street and elsewhere are
lost in the din of the growling, empty stomachs of
children and the sounds of terror from a people who are crippled, not
because their arms or legs have been severed, but because they can find
no jobs. The Moneyed Master has closed its doors against the people and
sits on its money like an old hen on rotten eggs.
The people will not prevail. No, not now. The gluttony of the
Master must first run uncontained like maddened rats in a cheese factory
until the sky grows dark and the light of hope fades, and there remains
only the sound of the Master’s gnashing teeth greedily devouring all
but the faintest dreams of the people.
With its endless propaganda the Moneyed Master has caused its slaves
to believe they are free.
*********************************************

The Gerry Spence Blog is located on WordPress.com, I want to point out
that this line of thought dovetails with my take of "watch out for the
military-industrial complex". While the military-industrial complex is
still massive and evil we must now focus on our new worse enemy, in a
nutshell, "WATCH OUT FOR THE GOVERNMENT-FINANCIAL COMPLEX". For more
read the post belowhttp://brucewilds.blogspot.com/2012/10/the-financial-political-complex.html

Sunday, August 21, 2016

It is bad enough the stupid media that we look to for information reports "misinformation" but to repeat it again, and again, and again becomes indefensible. Seriously, with the media knowing so little about math and numbers it is little wonder many Americans just don't get it. About an hour ago I saw across the CNN screen in bold print the claim of 30 MILLION DOLLAR FLOOD DAMAGE, this type of bad reporting should give us pause. Below you will find a bit more on why this number is far off the mark.

The fact is what many people claim is the equivalent of a thousand year flood event has hit Louisiana. Gov. John Bel Edwards said in a news conference on
Thursday that 13 people died during the flooding caused by rain that
began a week ago. Some 13,000 people were also rescued, 40,000 homes
damaged and approximately 86,500 people have filed for federal aid so
far. The numbers have risen since then and this
disaster is the worst to hit the United States since Superstorm Sandy which cost the government around 60 billion.

Again and again, the media has rolled out the line,
"and they anticipate it will cost at least $30 million — a number which may
grow as we learn more about the scope and magnitude of the
devastation." Well my friends finally something we can count on, the damage will far exceed this amount. Anyone who can multiply knows it only takes one hundred and fifty homes worth $250,000 to hit their insanely low mark. I always tend to underestimate cost still I put out there for your consideration the 10 billion dollar number, however, do not be surprised if the damage is far closer to 30 BILLION when all is said and done. Below are a few examples of stories repeating the 30 million dollar loss.

Tuesday, August 16, 2016

While pondering the sorry state of politics in America as the presidential election draws ever nearer it occurred to me this contest may very well be decided in the last waning days of the process. Several reasons feed into why many voters may pivot at the last moment and even surprise themselves. Like it or not, in reality, America is governed by a flawed two-party system that insulates the established government elites This underscores the fact that those not voting or writing in protest entering the name of someone with no chance of winning is like shouting at the wind. Overall our political system has proven very resistant to change, evolution over revolution does have some benefit, however, it often means things must get very bad before those in capital city hears the cry of the people.

History shows that Americans have a rather short memory and are skeptical of a media that spins everything. With this in mind as this week's polls show Trump's popularity flagging it should be noted polls often fail to accurately reflect the mood of the people. It was not long ago when the people of Britain shocked the world by voting to exit the European Union. In the weeks going into the vote all stops were pulled out to convince the fickle people of the United Kingdom the rejection of a Brexit was all but reassured. Poll after poll confirmed that when push came to shove they would choose to remain in the unpopular union that most leaders felt provided their best hope for the future.

Someone should tell the media that Trump bashing by any other name is still Trump bashing, and the public is able to recognize it. Making voters dislike Trump will not result in causing us to love Hillary more. The blatant bias of the media is so obvious that it is difficult to even call it news coverage. This is highlighted by more attention being placed on the antics of the candidates and their campaign staff or their party rather than the issues. Questions as to
the depth of Hillary's corruption are vastly overshadowed and dominated by questions of Trump's temperament on the
media controlled airwaves. The media seems hell bent on not reporting
about important issues such as the growing national debt, foreign
policy, jobs, and
healthcare. To top all this off like some kind of Whack A Mole the big man himself, President Obama, keeps taking time off from his busy schedule to berate and belittle Trump raising into question whether he would even be willing to turn over the country to the Donald if he is chosen over Clinton.

Obama Attacks Trump Time After Time

In the 2015 ABC debate only Trump raised his hand saying he would not pledge to support the Republican nominee, now we have found not only have several of those sharing the stage with him failing to keep their pledge but going much farther and coming out to solidly slam Trump, often on multiple occasions. This is all being played out at the same time anti-Trump forces continue
to ramp up efforts to parade establishment Washington insiders and
Republicans who do not support Trump before us. To make matters worse it often seems the parade is routed on a loop, meaning they are not being presented or passing by us just once but the same people are being run by us time and time again.

If this is not the dirtiest presidential campaign in history most Americans will concede it is scummy enough to rank up near the top and most likely it is going to get far worse in the final days. Efforts to tie Trump to the "Russians" because he seems less interested in promoting war by making Putin a punching bag and blaming him for all our woes have increased. This can be added to claims he defrauded thousands with Trump College and is a con man who has exaggerated his net worth that he gained hypocritically by play by the rules he now says are unfair to the middle class. I have watched entire interviews or a speech to later see a small clip taken out of context and spun to change its meaning. Remember just because the media or someone says something does not make it true.

Voting For Nobody Is A Poor Option

Meanwhile, the same media is busy downplaying questions about the powerful Clinton foundation and how the Clintons have amassed a fortune of nearly 100 million dollars since leaving the White House "dead broke" in Hillary's words. With more concern aimed at who hacked the e-mails than their content claims the Russians are trying to undermine our election seem to trump the corruption, they might reveal. Even the growing list of people associated with the Clintons over the years who have had untimely deaths is poo-pooed as bad luck.

I have found that when we look at a performer we often see them only as good as their last gig, Hillary's gig as Secretary of State was not great, and Trump's inability to articulate is not serving him well. A few final thoughts, it could be that part of the media bias toward Trump is driven by the fact he is not spending money on commercials and advertising through the mainstream media which is usually a big beneficiary during election years. Another is that it is possible the polls are being skewed by illegals or people that can't even vote declaring they are registered voters then voicing a strong preference for Hillary.The bottom-line is that we should not be surprised if this election is decided it its final days because in our fast-paced world many voters seem to remember only what happened yesterday.

Monday, August 15, 2016

The evidence is rapidly mounting that Obamacare is moving towards failure. In a piece titled, "Unexpected cost increase could complicate future Medicaid expansion" the PBS Newshour reported the Centers for Medicare and Medicaid
Services has notified Congress the cost of expanding Medicaid was $6,366 per person for 2015, this is about 49 percent higher than previously estimated. As time goes by it has become clear the Affordable Care Act has shifted consumer spending and is altering economic growth.Growth in the healthcare sector while driving the GDP higher has
resulted in the illusion the American economy is faring far better than
it really is. Healthcare has been growing rapidly, in 2015 spending in this sector ran about $4 trillion and accounts for almost 23% of the $17.4
trillion GDP.

This is big business at its worst, we must note, the cost of the two
behemoth government programs, Medicare and Medicaid, even exceed the
Pentagon's budget. Something seems very wrong with the realization that it is something that most people consider a big "negative," meaning the soaring cost of healthcare that has become such a big factor in pushing America's GDP higher. This
healthcare spending has slipped into the false narrative that America is enjoying a "growing
economy" spoken by people with a poor understanding of what constitutes
real growth. Unlike manufacturing jobs that have long-term positive benefits such as building value that curbs imports and slows the flow of
dollars away from America we find jobs in the healthcare sector often
represent a transfer of wealth and growing debt that drains assets from more promising
areas. The healthcare sector adds size to the economy but not the quality the numbers suggest.

Skyrocketing cost puts at risk the rational of the whole ACA healthcare program known as Obamacare, and while this issue has not been a big driver in the current presidential election it remains a deep-seated issue for most Americans. It appears the reason the campaigns are not more focused on healthcare is that it is a complex polarizing issue best left to be corrected by flowery promises rather than hard facts. Another reason may be Trump as the Republican candidate may not be strongly opposed to something resembling a single payer system. Healthcare remains one of the highest priorities for the average
American family but during this bizarre political season, it seems to have
been pushed aside by the antics of both candidates. The question as to
the depth of Hillary's corruption and Trump's temperament dominate the
media controlled airwaves. The media seems hell bent on not reporting about important issues such as the growing national debt, foreign policy, jobs, and
healthcare.

Since the cost of expanding Medicaid to millions more low-income people has risen far faster than projections, this is putting President Barack Obama’s health care law under closer scrutiny. The new cost estimates could complicate any proposed extra incentive for states that have not yet
expanded Medicaid and calls into question ideas such as giving them three years of full federal financing no matter when
they start. The new estimates are also a warning of problems ahead for Democrat Hillary
Clinton, who has promised that if elected president she would work to
expand Medicaid in the remaining 19 states that have not done so. Higher
costs will make it harder to sell any plan to finance the program to Congress. The ACA called for the federal government to pay the entire cost of
the Medicaid expansion from 2014 through the end of this year. Under the law, people making up to about $16,390 for an individual and $33,530 for a family of
four are eligible for Medicaid at little or no cost to them.

Another development causing concern is the recent collapse of an alternative to traditional
insurance plans known as co-ops. Nearly half of them, which were
created through the Affordable Care Act, have shut down because they have been unable to remain financially solvent. This has put roughly a half a million people in the ten co-ops out there again looking for plans, those that had been in these co-ops are now facing paying more and
getting less. It should be pointed out that missing cost projections by nearly 50% is
not that uncommon for government forecasters, in fact, even private
forecasters have difficulty predicting the future. Government forecasters job, however, is
often complicated and influenced by politics that causes them to massage numbers to
fit growth scenarios that probably are already far too optimistic.

Regardless of what any politician might claim, the elephant in the room when it comes to healthcare remains, making it more affordable and in the end just who is responsible for paying the ever increasing cost. It is only because American has reached the point in the political game
where people have adjusted to the horribly flawed ACA and politicians fear upsetting
the apple cart by confronting the fact no easy replacement or fix exist that will please everyone that the issue is being placed on the
back-burner. Ironically, with Washington picking up so much of healthcare cost and the full cost of the Medicaid expansion States have had little incentive to be cost-conscious up until this point. Many states are paying very high rates to benefit insurers, hospitals,
and major local businesses, this only increases the cost and the potential for waste.

The long-term effects of Obamacare are slowly becoming apparent and by far the
biggest problem is that it has driven healthcare costs through the roof. The nonpartisan experts at the CMS Office of the Actuary wrote in
their report that they had been expecting per-person costs to decrease
in 2015. But the opposite has happened in 2016 and is expected again in 2017. With these increases gone is the infamous promise Obama made on how the average family will
save $2,500 a year on healthcare coverage. Many
people think that since Obamacare has been around for a while it is
proof that the law works. The fact is Healthcare in America is still a broken system by any measure. Americans spend more on healthcare than
people in other developed countries with very poor results. The bottom-line remains that Obamacare is fatally flawed and each day moves closer to collapsing under its own
weight.

Tuesday, August 9, 2016

Time and time again I hear how many investors think that even if things go downhill fast they will be smart enough to get out of the markets, others simply think no way exists for these markets to fall sighting a lack of investment alternatives. After the debacle in 2008 where they saw the market take nasty and violent swings they claimed, they have learned a few things that will enable them to make the right moves before it is too late. After years of moving upward, this bull market is long in the tooth. While the economy is mired in slow growth and across the world debt is exploding market bulls have embraced a "Buy the Dip" mantra exploiting a market that moves ever higher pushing aside the market's ability for true price discovery. It is against this backdrop that one such optimist fella wrote the following;Yes indeed 'this time it actually is different'. There simply are not any good alternatives this time. Although the FRB increased rates slightly in Dec. 2015 the interest rates being paid out on Treasury Notes, Savings Bonds and CD's have all continued to fall. As have mortgage loan rates continued to fall. 80 to 90% of all wealth is in the hands of the 10% at the top. They grow wealthier each year and THIS TIME, they do not have any good alternatives to the stock markets. This time, it is different because we as investors can not say I don't like the risks because when you are sitting on millions of dollars worth of liquid assets you Have To put it somewhere. This time is different because far more of the wealth is consolidated at the top. Many top tier stocks are paying dividends of 4+% compared to 1% to 1.5% on Treasury notes and CD's where the money has to be tied in longer to even get those lower rates. Imagine you had $5 million of liquid assets you had to invest today. Would you buy 10 year Treasury Notes and settle for a 1.5% return which amounts to $50 thousand dollars worth of T-note gains each year at 1.5%. or would you put your money into top tier stocks for a 4+% dividend or a $200 Thousand dollar dividend gain each year. Yes, the stock market risks are higher but the rewards are 4 times higher. And another game changer is: don't forget that today we have the added bonus of lower federal tax rates on dividend income. Times and condition have indeed changed, making this time indeed different. ALL IN. Up, up and away. The best gains lie ahead.

His thoughts seem to reflect what many investors are thinking. But what is not being taken into consideration is that if the market falls like a flash crash on steroids they are trapped. We have been assured that can't happen because circuit breakers have been put in place to arrest panic style moves, however, imagine a market that falls, trade is halted, and the market simply does not reopen for days or even weeks. As remote as this might seem please take a moment to consider the possibility and the far-reaching ramifications. While you are imagining this scenario realize that America's stock market is the gold standard and consider how less stable global markets would react in countries like China and Brazil.

For a long time, I have been trying to develop a scenario for a market "super crash" and a reasonable map that would arrive at such a situation. To say I'm negative about this economy is a gross understatement. I saw the last housing bubble coming and predicted the crash in my book Advancing Time. I continue to contend that we have never recovered from the Great Recession or corrected the many problems that haunt our financial systems such as derivatives and collateralized debt obligations. By printing money, imploding interest rates, and exploding the Federal Governments deficit we have only delayed the "big one."

I recently came upon these two quotes on macroeconomic stabilization and crisis. First, from Macresilience;

"As Minsky has documented, the history of macroeconomic interventions post-WW2 has been the history of prevention of even the smallest snapbacks that are inherent to the process of creative destruction. The result is our current financial system which is as taut as it can be, in a state of fragility where any snap-back will be catastrophic."

And next from Nassim Taleb (author of The Black Swan);

"Complex systems that have artificially suppressed volatility tend to become extremely fragile, while at the same time exhibiting no visible risks. In fact, they tend to be too calm and exhibit minimal variability as silent risks accumulate beneath the surface. Although the stated intention of political leaders and economic policymakers is to stabilize the system by inhibiting fluctuations, the result tends to be the opposite."

These quotes suggest an analogy with ideas about forest management when natural fires are suppressed. If random fires do not periodically clear away forest underbrush, we see a build-up of flammable material sufficient to power a massive conflagration. I certainly think an equivalent truth applies to financial markets. The longer it has been since a painful collapse, the greater the willingness to pile on leverage and complexity, such that the next crisis becomes unmanageable. The "Too Big To Fail" and other policies implemented since 2008 have distorted markets across the globe and laid the groundwork for "The Big One", or what we will someday look back on as the mother of all sell-offs.

What happened in Cyprus a few years back should serve as a warning to anyone who thinks money in the bank is safe. A bad haircut, in this case, means you have been robbed. That may be the case if the government reaches in over a long weekend and steals money from your bank account. This is a horrible precedent to set, and the worst part may be how many people accept it saying it is ok as long as it is only on the larger accounts and only impacts the savings of someone else! It is very important to remember these low-interest rates come at a price, a dark side exists to current economic policy. In the long run, the benefits they bring may be outweighed by the distortions they cause.

By not taking steps to correct many of our ills in a way we have made things worse. We have not made the structural changes necessary for our economy to become sustainable. We have put band-aid upon band-aid, upon band-aid while what was necessary was the amputation of a diseased limb. After all the threats that this market has avoided, and sidestepped, it is possible that many now think of it as invincible. This market has overcome the death of the euro, the financial cliff, and the end of Greece as we knew it. My studies in "microeconomics," and observations in the current real-estate market, both as an owner and hands-on landlord allows me to predict, we ain't seen nothing yet!

Sunday, August 7, 2016

Mark my word, it is the average Joe (or Jo) will get crushed in the coming collapse. Few people really think about the economy to any great degree or even
try to understand it as they go about their daily existence. The average person only begins
to care about "the economy" when they are directly affected or financially slapped in the
face. Without a doubt some wealthy people will take a hit, however, overall the pain will fall squarely on the shoulders of the masses. The fact is much of what happens must be viewed through the eyes of relevant value. Certainly, a few of the .01% will fall but even after losing a great deal of wealth they will remain wealthy while the same cannot be said when it comes to the average man or woman on the street. History has shown during times of economic collapse the middle-class and the masses tend to suffer most and carry the brunt of the pain.

Savers And Wage Earners Often Get Hit Hardest

Do not be deceived into thinking the elite .01% play by the same rules as you and I. The middle-class or those who have worked and saved will see their wealth vanish and at the same time be surprised to find how resilient debt and obligations can be. Oh, the sweet allure of easy profits poses a charm or attraction that is hard to match. It draws investors like a magnet with its seductive call, sadly while we dance about drinking the Kool-Aid it is not uncommon to discount the risk we have undertaken. It is far easier than you might think to lose
your wealth or have it ripped
away by crooks because you invest in a scheme that turns sour or a slew
of
other "bad luck" scenarios. When a check fails to arrive the time to take action may have already passed.

Again I caution, the first goal of achieving financial security is to take steps that ensure capital preservation. Many of the "modern monetary
theories" in use today have not been proven over time but reflect an
attitude that we can control economic cycles better than in the past.
The basis of the economy we have today is unsustainable and because
it has been able to exist for so long does not mean it can continue.The
fact the system muddles through does not guarantee that we will not
suffer financial harm as individuals. Even though we are often led to
believe shortcuts exist the truth is the learning curve in how to invest
and protect your assets is both long and hard. Simply reading a book,
taking an investment
course, learning a new charting or technical system is no guarantee you
will make money. Many investors only learn this lesson the hard way and after a series of costly
mistakes
and errors.

The debt burdens we take on when all is well can become overwhelming during an economic pullback. The fact is most people are totally unprepared
for any kind of a massive financial shock to society. This vulnerability is carried by the masses as most
people do not have at their disposal the full range of investment
options
those very engaged in the markets have developed. You should view the
economy as an economic battlefield and imagine your enemy carrying a
M16 while you are armed with only a stick.Building a better arsenal is not an easy task and cannot be accomplished
overnight, it takes both planning and a great deal of effort, this is
not a task that should be outsourced or entrusted to someone else, your
financial survival depends on it.

Banks Can Limit Access To funds!

The lack of
investment options that many people have will leave them unable to react if and when a trend dramatically shifts. The bulk of society is extremely vulnerable when a shift does occur and you do
not want to be in this group! A major concern should be that we are
often lulled into being far too complacent
as to the real economic risk that surrounds us. A glaring example of
this is
how people just assume the bank will honor their credit lines or they
will be
given access to their savings in the case of economic difficulty. In a
crisis as everyone rushes to the exit it is silly to think you will be
served in an orderly fashion or even fairly. Mind the "small print" and remember the banks are not your friend.

It is debatable which is the lesser of two evils, the Wall Street bankers or the government when it comes to placing blame for orchestrating the coming economic trap that awaits us. Years ago President
Eisenhower warned the American people about the Industrial Military
complex, but nobody warned us an even more evil alliance that of the "Financial-Political Complex." Everyone knows the Federal
Reserve and other central banks hold great sway over the economy, however, when forced to ask which is the worse
of these two evils the answer is very troubling. Government wins hand
down because the bankers can claim their goal is to make money and it is the politicians we elect to lead, protect and guide us, we do not elect or appoint
bankers.

When the next financial crisis hits, and sooner or later it will, no one can predict and how deep and long it will be. Just as difficult is speculating the
form it will take. It has been many years since panic has dominated the
streets and most Americans have never faced such a situation. It is
important to recognize several catalysts exist that could usher in such a
scenario, but predicting such an event is impossible to
time. Watershed
events can occur in the blink of an eye or be spread out over weeks or
even months. The base on which our economy sits is comprised on ever
growing debt that is unsustainable. Because this system has been able to
exist for so long does not mean it can
continue. The fact the economy muddles through and forward does not guarantee that we will not suffer financial harm as individuals.
Many economic theories exist, but they are often baffling, confusing, as well as full of holes and conundrums.The science of economics is
riddled full of loops that feedback
upon themselves and unexpected pitfalls based on expectations that may
never take place.
All this can become quite abstract with economist seldom agreeing and
often predicting events that never unfold as expected or planned. The way people react to an overall economic policy may have
to do as much with timing and
perception as it does with reality. While many
of the "modern monetary
theories" in use today are spun to reflect an
attitude that we can control economic cycles better than in the past by
using newly forged tools the simple truth is they have not been proven over time. To navigate the treacherous terrain of investing without a
road-map or knowledge means you travel at great risk.

An area of big concern is that as we have accumulated wealth over the years a trend to store it away in promises made on paper or existing somewhere on a computer database. The main reason that inflation has not raised its ugly head or become a
major economic issue in recent years could be because this lowers demand for tangible products and goods. My misgivings with current economic policies are many, of chief
concern is the massive debt being accumulated by governments
and the rate that central banks have expanded the money supply. If
a great deal of this money would suddenly shift into tangible goods seeking a safe haven inflation
would soar even as debts go unpaid and promises are left unfilled. If I'm wrong and another scenario takes place such as stagflation or deflation an even bigger problem may emerge and that is the massive amount of unpaid debt that will have to be written off, either path is fraught with peril.

Thursday, August 4, 2016

One of the most important things to remember about the global currency system is that by design it is fairly closed. This means relative value tends to merely shift back and forth between the four major currencies that dominate the system, this is the main reason currencies appear more stable than they really are. After writing many articles about the currency markets that warned of volatility ahead my concerns have not diminished over time. This is one area where the average citizen tends to overlook or not understand the deep ramifications of holding their wealth or savings in a currency that may drastically rise or fall in value. The truth is that such moves directly impact your position in where you rank in relationship to all the other people on the planet in terms of wealth.

A Very Important Chart In Understanding The Dollar

The chart to the left is very important because it highlights just how much four major currencies dominate the world stage. The
pound, the euro, the yen, and of course the dollar make up a huge majority of the global currency market. The remaining currencies remain small bit players in the overall scheme of things. The
status gained by the dollar being deemed the "reserve currency" by which all others are
weighed and in some way pegged does not make the dollar infallible or
guarantee it will remain strong, but the liquidity of such a large market
does add a resilience to the American dollar. The way the global economy is structured the dollar is the linchpin of global
finance thus, it has guaranteed itself a place at the table until dethroned.

Unstable currency markets can be a precursor to massive shifts in value
and a sudden drop in confidence. It is logical to think that in such a
situation insiders would be the big winners.Most people go about their day with little thought to the fact that we are all pawns in the "currency game" and
subject to its bizarre feedback loops. John Maynard Keynes said, By a continuing process of inflation, government can confiscate,
secretly and unobserved, an important part of the wealth of their citizens.
As
the central banks print like crazy to control interest rates on bonds
they devalue the currency. While there are not many Bond
Vigilantes there are a slew of Currency Vigilantes and they are ready
to make their presence known.

It would be wise not to underestimate the amount of risk
currency fluctuations inject into the economy through the derivatives
market and other factors such as the carry trade. Many highly leveraged
bets have been placed that depend on currencies as a stable foundation.
The explanations and reasons often given to explain currency moves are
at times so illogical they seem laughable. It seems analyst are always
quick to justify any move or fluctuation with the theory of the day
rather than with a long-term appraisal based on the economic health of
the economy a currency represents.

Currently, many of
the people following this subject are growing rather skeptical as to the
future of our system of fiat money. The whole system is based on faith that other
people will be willing to accept it even though it is not backed by
anything other than a promise from the government that has issued it.
Simply put Fiatmoney is a currency established
as money by government regulation or law. The term derives from the
Latin fiat ("let it be done", "it shall be") used in the sense of an
order or decree. It differs from commodity money and representative
money it that is is not backed or able to be converted into a hard asset such as gold.

This
means that at some point the general public might find they are holding
nothing more than paper promises of rapidly declining value if the
currency markets begin to reflect diminished confidence in the
system central banks have created. As the currency games continue to
ratchet ever higher it is becoming more apparent that we are standing on
shifting sand.It is difficult to ignore the truth that the
world is changing at a rapid pace and each day when we awake what
existed yesterday may have vanished during the night. Countries and
governments can come and go, the recent coup attempt in Turkey is an
example of the fragility facing nations across the world.

A key problem with fiat money is that it is prone to abuse by those in power, the ability to simply print money to cure your economic problems is way too seductive, this makes it an accident waiting to happen. The
schemes bankers have used for years to hide and transfer
debt are coming under attack as stress builds over time and our system ages. Today we find promises have accumulated and been stacked one upon another, this is evident when we look at the entitlement systems governments have created, social security, pension funds, and in many far less obvious examples. At
the first sign that faith is beginning to erode in any one of the four
major fiat currencies, the assault upon that currency might culminate in a reset of
the entire economic system across the globe.

Today many
people have indicated the only time it will be acceptable for the central banks to
raise the interest rate is
after their negative affects have become
clearly evident. By then it most likely will be too late to avoid a massive economic reset. It
should be noted that this will not please many people who will feel
deeply abused and totally betrayed if this scenario were to play out.
The citizens in a country using a rapidly depreciating currency would
face hyperinflation and most would be financially ruined. The
bottom-line is
that while many people go about their daily lives giving little thought
to currency valuations they leave themselves open to the whims of those
that control, manipulate and play in this important area of the global
economy.

Ten percentage points higher or lower against a foreign
currency can have a great deal of impact on how your net worth stacks up
against someone across the world. This rapidly becomes apparent to
anyone doing a great deal of travel or buying foreign goods. It also
highlights why all of us should be very concerned where we stand when
the smoke clears from the currency wars before us. While most people remain totally oblivious to these dangers do not underestimate
the forces in play or the great risk of economic damage through contagion. When all is said and done do not be surprised if the "currency games" bring into focus the fact
that debt does matter. This will destroy current Modern
Monetary Theory that attempts to sidestep this core economic
principle.

Wednesday, August 3, 2016

With the Presidential election moving closer it is again time to revisit the subject of student loans. This subject is important for several reasons and often becomes part of the political debate when those running for office begin to pander and use cheap loans or what might be seen as "free money" as a way to buy votes. My search for charts showing current data on outstanding loans proved difficult because I found little in they way of recent charts and that most were published several years ago. At that time the talk about "rising student debt" was more in our face. Today the issue has become how we should handle this debt.

Originality, the idea was that a student should be able to get a loan to help pay for university tuition,
books, and basic living expenses. It seems, however, that many students are borrowing
against their future at an almost unimaginable pace and using the
money for things other than education. Too many young
people and even older people are taking student loans but have expanded "living expenses" to
include cars, trips, vacations and more. All this has a very dark side
that will affect the lives of these borrowers going forward and has the
potential to grow to crisis dimensions in the future. Society is in some ways encouraging young people to take on this debt
and to hock their futures. This is akin to the, "I will gladly pay you
Tuesday for a hamburger today" way of thinking. While it serves the
propose of keeping large numbers of young Americans off the unemployment
roles, it creates huge problems we cannot ignore as much of this
money is being poorly spent.

I personally have witnessed several of
these students rent an apartment, fail at school, and then be forced to
move back in with parents when the money ran out. Sadly, like the gifts
from pawnbrokers and payday loan sharks, many of the borrowers will
live to regret taking this easy money.The burden of paying for these college loans is even beginning to
encroach upon and wreak havoc on the finances of an unexpected
demographic: senior citizens. Reports show a surprising number of Americans 60 and older
still owe about $36 billion in student loans, this information provides a
rare window
into the negative dynamics of student debt. More than 10 percent of
those loans
are delinquent. As a result, consumer advocates say, it is not uncommon
for Social Security checks to be garnished or for aggressive debt
collectors to
harass borrowers in their 80s over student loans that are decades old.

Student Debt Can Haunt People For Years Or Decades

Researchers indicate Americans may be struggling with student debt far more than we thought. According to the Federal Reserve Bank of New York rates for student loans in serious delinquency increased from 11.1 percent to 11.5 percent in the second quarter, but
that does not reflect the whole picture of student loan debt. While that rate is more or
less in line with other forms of consumer debt like credit cards and
mortgages, it understates the problem because almost half of student debt is currently in deferment, in grace periods
or in forbearance. This means they are "temporarily" not in the repayment cycle.
If all loans were in the repayment cycle, delinquency rates might be roughly twice as high as reported. Please note, while in those
approved grace periods they are rated as current, however, interest is being added to the balance.

Once
researchers exclude those loans to more accurately reflect the pool of
borrowers who can actually be late, the delinquency rate more than
doubled. In the end, 27 percent of the remaining borrowers were late on
their payments, totaling about 21 percent of the aggregate loan balance. The Fed’s data from its 2013 Household Debt and Credit: Student Debt report shows how student loan delinquency rates are higher when considering loan deferments and forbearance.
Key findings from the report (with data from the fourth quarter of 2012) include:

About
44 percent of borrowers were not yet in repayment due to deferments and
forbearances. Excluding those, the effective 90+ delinquency rate
rises to more than 30 percent.

About 17 percent of borrowers
were past due on their student debt more than 90 days in 2012, a large
increase from under 10 percent in 2004.

The transition rate of
borrowers in repayment from current to delinquent has been rising since
2008 from around 6 percent to nearly 9 percent.

In an opinion piece published in USA Today last year, Mitchell D. Weiss from Credit.com responded to the Fed student loan delinquency data
by stating that, “Although student loans make up only 10 percent of all
consumer debt, the amount of seriously past due student loan payments
total nearly one-third of all seriously past-due debt payments. What’s
more, of the total $1.19 trillion in outstanding education-related
loans, only about half that amount is actually in repayment at this time
(the balance is deferred because the borrowers are still in school.)”

Student debt has become such a hot-button election year issue
that it might even sway the results of the election. This is an area
where pandering politicians claiming to feel the pain of those burdened
or concerned about college cost can in effect buy votes by promising a favorable fix.All this gets sticky because shrewd politicians have framed the issue in a way that stirs the voter's
emotions. Student loans have received considerable media attention over recent
years with growing concern about the crushing debt loads assumed by
students and their parents. Petitions circulating online to forgive many student loans have collected a huge number of signatures. This also has become an area of resentment or a question of fairness to many voters who have actually paid their debt.

Government affects the cost of higher education in many ways such as subsidizing the
budgets of public colleges and universities. Federal and state
governments give money to students through
programs like Pell Grants and the American Opportunity Tax Credit. Below-market interest rates for student loans is just another subsidy
mechanism. Like the government programs involved in supplying people
with paid healthcare making cheap government loans available for
education encourages people to consume
more than they otherwise would. While many would argue that this is a
good thing it also causes some negative distortions in that it encourages
students
at the margin, to choose more expensive educational institutions than
they otherwise would, and to finance more of their education with
borrowing. These incentives leave students burdened with debt and also
makes them
less focused on price than they should be.

When government money begins to flow into a system it often results is higher cost, in education, many
people see the government loans as a driving force behind tuition
inflation. Instead of extending the policy of holding Stafford Loan
interest
rates very low, it might be better to let rates go back up and redirect
the cost of
the subsidy into an expansion of Pell Grants and refundable tuition tax
credits. This policy would keep the positive distortion associated with
Stafford Loans (people get more education) without the negative ones
such as people are less price sensitive and borrow more money. The clear
instinct of many politicians is to defend cheap loans in an
effort to be on the side
of education. But subsidizing education need not mean subsidizing
borrowing. We’d be better off searching for ways to drive the cost of higher education down
with innovations like the shift to more online textbooks and classes.

About Me

Bruce Wilds is a contractor that owns real estate in the Midwest, his holdings include apartments and office complexes. He is anchored to reality and the economy as he maintains, designs, and leases buildings. This has made him keenly aware of rapidly changing lifestyles, this blog incorporates many of the experiences and knowledge from his hands-on business style, extensive travels, and studies of history, politics and economics.